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1P vs 3P: Strategies for selling on Walmart and Amazon

Most marketplaces offer both 1P and 3P options. For Walmart and Amazon sellers, planning your strategy for what to do on each marketplace must be part of a cohesive plan to avoid getting delisted. To highlight the importance of choosing your steps in the eCommerce ecosystem carefully, here’s a cautionary tale.

One seller lost 90% of his business because of how he set up his items on Walmart and Amazon. He was supplying directly to Walmart, and using the Amazon marketplace to sell directly to consumers. He sold 10% on Walmart and 90% on Amazon, but since he was selling directly to Walmart, they were able to set prices lower than what the seller had listed on Amazon. When Amazon found out, they de-listed his items and he lost 90% of his sales.

Set up your 1P and 3P relationships well, across marketplaces, to avoid any losses in revenue or other seller nightmares.

What is 1P and 3P?

A first-party relationship (1P) means the marketplace acts as the retailer, and the brand is the wholesale supplier.

A third-party relationship (3P) is when the brand is the retailer, and sells directly to buyers via the marketplace.

Your options for the Walmart and Amazon mix include;

  • 1P Walmart, 3P Amazon: Supply to Walmart, sell to consumers on Amazon
  • 3P Walmart, 1P Amazon: Supply to Amazon, sell to consumers on Walmart
  • 1P Walmart, 1P Amazon: Supply to both Walmart and Amazon
  • 3P Walmart, 3P Amazon: Sell to consumers on both Walmart and Amazon

1P vs 3P on Walmart and Amazon

Benefits of 1P

Selling 1P on Walmart or Amazon means you sell directly to the marketplace, and they then sell to the buyers. Marketplaces are more likely to promote listings they own and can be sure of, and they’ll purchase items in bulk. 1P sellers may also get access to more marketing tools.

Since you’re the supplier, all you have to worry about is the supply, and the marketplace will handle customer-facing aspects. You remove all inventory risk from your business, because your items are sold and on the books.

Your items also get the benefit of being listed as an Amazon or Walmart product, which can encourage trust and potentially more purchases.

Drawbacks of 1P

The biggest drawback of 1P is lack of control and lower margins. Selling at wholesale instead of retail hurts your margins, but even beyond that, you give the marketplace power to control pricing, even beyond your recommended sales price.

In the case of Amazon, although you get access to more merchandising options, 1P sellers are still expected to pay for them.

You also lose some leverage in the relationship, since you end up becoming more dependent on the marketplace and are at the mercy of their accounting departments when it comes to getting paid in a timely manner. For example, 3P sellers on Amazon typically get paid every 7 or 14 days. However, 1P sellers typically get Net 90 terms, with the option for Net 30 or Net 60 if you provide discounts (2% or 1%, respectively).

Finally, you end up not controlling your entire inventory, so if you’re running low on inventory in Walmart, you cannot use your items with Amazon to fulfill additional orders.

Benefits of 3P

When you sell through the marketplace, you get the benefit of setting your own prices so you can protect your margins. You can also ensure you don’t get de-listed on any marketplace due to a price discrepancy, since Amazon crawls listings on competitor marketplaces.

3P also means you control your own inventory, so you can fulfill orders on various marketplaces from your stock.

Finally, you have complete ownership and control of your product, and get additional brand exposure for your seller account.

Drawbacks of 3P

Selling directly to consumers through Amazon or Walmart means you will have to set up your own listings, ensure they are optimized, and handle your own marketing. This option does come with more responsibility on the seller, but this can be mitigated by outsourcing to strategic partners.

Your options and our recommendation

If you go with 1P on one marketplace, and 3P on another, you risk getting de-listed. Amazon and Walmart regularly monitor other marketplaces, and if they find your item at a lower price your listing will get penalized. This can have lasting effects on your seller account, so we strongly recommend against a combination of 1P and 3P for different marketplaces.

Note: Amazon used to allow sellers to do 1P on some items, and 3P on others. This is no longer the case, as Amazon is shutting down its Vendor Express platform.

So that leaves either 1P across marketplaces, or 3P across marketplaces.

If you do 1P across marketplaces, you let them fight it out amongst themselves on pricing. You send your products at wholesale price and then hope they end up selling enough to cover your margins and encourage reorders after the price war.

Plus, there’s no assurance that the marketplaces will purchase all of your products. That means you may be stuck with inventory and no place to sell them. We don’t recommend this.

Our recommendation: 3P across marketplaces

When you do 3P across marketplaces, you control your own pricing and can put all of your inventory up for consumer purchase. You maintain authority over your products and brand(s), get higher margins, have better payment terms, and even get better sales velocity.

Most sellers who prefer 1P over 3P do so because it seems more convenient, but it would be at the cost of your business health. 1P isn’t known for having good support unless you pay for dedicated service, it’ll cut into your margins, and could affect your supply line if you don’t get paid on time.

However, it can be just as simple (or even easier) to sell as a 3P seller than 1P if you choose your partners wisely. Logistics is usually the biggest stumbling block for 3P sellers, especially because it can be difficult to get on fast shipping programs or ensure seamless delivery.

3P seller with 1P benefits

If you’re a 3P Walmart seller, fulfilling with Deliverr will give you the same promotional benefits as a 1P seller. Deliverr integrates directly with Walmart to get you almost instantaneous access to Walmart Free 2-Day Shipping tags and Walmart Performance Ads.

3P sellers have seen their sales jump more than 500% after enabling free 2-day shipping, and Deliverr partners enjoy an easy onboarding process and transparent all-inclusive pricing.

Deliverr also offers exclusive 2-day shipping discounts for Walmart marketplace sellers.

Visit our cost calculator to find out how much it would cost you to fulfill with Deliverr.

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